Free Market Predicted For Electricity By 1990s

When former Illinois Commerce Commission Chairman Philip O`Connor looks at today`s dramatically changed natural gas marketplace, he sees the way electricity will be bought and sold by the early 1990s.

Others may scoff, but O`Connor was similarly dismissed when he began talking about natural gas moving toward a free market.

Most of the changes O`Connor predicted have taken place.

O`Connor concedes that it will be more difficult to deregulate electricity.

Electricity is produced almost entirely for local consumption and is harder to convey over a distance.

Then there is resistance to change from utilities, regulators and the public.

Nevertheless, O`Connor and others point to developments they say are leading to a wholesale spot market for electricity.

They cite the plan put forward by Commonwealth Edison Co.

Edison seeks to take three unfinished nuclear reactors and turn them into a subsidiary. The subsidiary would no longer be regulated by the Illinois Commerce Commission, but by the Federal Energy Regulatory Commission, which takes more of a hands-off approach.

The utility, and ultimately consumers, would pay the subsidiary $660 million annually for electricity for five years. After that, the subsidiary would be free to sell power on the open market.

Also cited is the spinoff by Tucson Electric Power Co. of its Alamito Co. subsidiary, which, in addition to providing electricity in Arizona, sells power to San Diego Gas & Electric Co.

And Florida is moving toward a wholesale system like the one in place in Texas.

Some heavy industries, such as oil refineries along the Texas Gulf Coast and phosphate processors in Florida, create electricity as a byproduct. These facilities are known as co-generators.

In Texas, electricity produced by co-generators is sold to utilities.

Then there is Geneva, Ill. The Kane County city successfully sued Edison, arguing that the utility was violating antitrust laws by requiring that Geneva buy all its electricity, if it bought any, from Edison.

After negotiating with utilities in several states, Geneva began buying electricity from Wisconsin Electric Power Co. Mayor Richard Lewis says the city should save $18 million over 10 years.

Geneva could shop around because it--not Edison--owns the distribution lines.

But O`Connor says Geneva showed that electricity can be carried over a considerable distance. And the savings, he says, show the benefits of a free- market system.